Wills, Trusts, Guardianships, and Fiduciary Administration

• Publication year: 2022

Wills, Trusts, Guardianships, and Fiduciary Administration

Mary F. Radford

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Wills, Trusts, Guardianships, and Fiduciary Administration

Mary F. Radford^*

This Article discusses significant cases decided by the Georgia Court of Appeals during the period of June 1, 2021 through May 31, 2022, and significant Georgia legislation enacted in that same period relating to Georgia probate and trust law, guardianship, and estate planning.¹

I. Georgia Cases

A. Inclusion of Adult-Adoptees as "Children" in Wills and Trust Instruments

In Morse v. SunTrust Bank, N.A.,² the Georgia Court of Appeals examined once again whether adult-adoptees are included in the class of "children" in wills and trust documents.³ This case involved the interpretation of Moi Monroe's will, which created upon his death a "testamentary trust"⁴ that in turn was divided into thirteen sub-trusts

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with his thirteen grandchildren as the "primary beneficiaries" of each sub-trust.⁵ The will stated that, should a primary beneficiary become a parent, that beneficiary's annual income interest from that beneficiary's trust would then be divided between or among the primary beneficiary and the primary beneficiary's children. The will stated further that, when a primary beneficiary died, that beneficiary's interest would pass to his or her descendants. However, if a primary beneficiary died without descendants, that beneficiary's interest would be distributed among the other sub-trusts.⁶ The will contained two other relevant provisions: a spendthrift provision ("No beneficiary shall have any power to dispose of . . . any interest hereunder"),⁷ and what the court referred to as a "good faith" provision ("I would expressly enjoin my family, including all descendants whether now in life or hereafter borne, to deal in fairness and in good faith in all matters, and particularly with respect to my probate estate and the trust estates herein created").⁸

Mr. Monroe died in 1967.⁹ One of his grandchildren, Molly, never had any biological children of her own. In 2019, however, the state of Florida granted Molly's petition to adopt two adults, Steven and Stuart.¹⁰ Steven and Stuart's biological parents consented to the adoption and "possibly were present during conversations about Molly adopting Steven and Stuart to make them beneficiaries of the trust."¹¹ The day after the adoptions were finalized, Steven and Stuart filed an action in the Gwinnett County Superior Court seeking a declaratory judgment that they were beneficiaries of Molly's sub-trust along with Molly. Some of the beneficiaries of the other sub-trusts (the Other Beneficiaries) filed a motion for summary judgment that Steven and Stuart were not beneficiaries of Molly's trust.¹² The superior court granted the Other Beneficiaries' motion and found that the adoption was "an act of subterfuge" and that it also violated the spendthrift provision and the

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good faith provision of the will.¹³ The court of appeals reversed and determined: (1) that the Georgia adoption statute allowed Molly's adult-adoption of Steven and Stuart; (2) that the four corners of Mr. Monroe's will did not preclude the inclusion of adult adoptees as beneficiaries; (3) that the superior court erred when it found a statutory "subterfuge exception"; and (4) that neither the spendthrift provision nor the good faith provision precluded Molly from performing an act that was permitted by the law and the will.¹⁴

The court of appeals discussed the Georgia adoption law with the well-accepted proposition that the law in effect on the date of the testator's death governs the construction of the will, absent any contrary intent expressed in the will itself.¹⁵ On May 15, 1967, the testator had executed his will, and in October 1967, the testator died.¹⁶ On April 18, 1967, a new Georgia adoption law that expressly allowed an adult-adoptee to be treated as the "natural child" of the adopting parents was "approved" by the Georgia legislature.¹⁷ The court of appeals applied this 1967 law and determined that Steven and Stuart were "the legal equivalent of natural children of Molly."¹⁸ Next, the court of appeals confined itself to the four corners of the will and determined that the language of the will was plain and unambiguous.¹⁹ The Other Beneficiaries had argued that the testator's description of grandchildren hereafter "borne" or "borne to me" indicated an intent to exclude adoptees.²⁰ The court of appeals disagreed, and pointed out that, at the time, the adoption law in effect stated that adopted children were to be treated as "natural bodily issue" of the adopting parent.²¹

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Next, the court of appeals addressed the "subterfuge exception" theory.²² The court noted that the Other Beneficiaries had claimed (and the trial court had agreed) that Molly engaged in "a technical reading of the Georgia Adult Adoption Statute and furtively applied it for a purpose which is unjust, inequitable, and plainly out of step with what the Legislature intended in enacting such statute."²³ The Other Beneficiaries relied on authority from foreign jurisdictions that the court did not find persuasive.²⁴ The court pointed to its long-standing approach of looking to the plain and unambiguous meaning of a statute and noted once again that "it is not the judiciary's province to create exceptions to statutes."²⁵

The court of appeals then examined the Other Beneficiaries' proposition that Molly's adoption of Steven and Stuart had resulted in a "transfer" of her interest to them in violation of the spendthrift provision.²⁶ The court rejected that theory, and noted that, because the adoption law treats adoptees as "natural bodily issue" of the adoptive parents, the birth of any child to any of the primary beneficiaries would constitute a "transfer," a result that the Other Beneficiaries clearly did not want.²⁷ The court used a similar approach when it rejected the proposition that the adoption violated the good faith provision in the will: the court noted that, were this the case, it was arguable that all of the beneficiaries who had given birth to children had acted in bad faith—again a result that the Other Beneficiaries did not want.²⁸ The court concluded that Molly had done nothing more than the adoption law and the will allowed, and thus could not be held to have violated the good faith provision.²⁹

B. Suit by Successor Trustee against Predecessor Trustee

The case of Antley v. Small³⁰ was examined by the court of appeals in the context of claims made by the beneficiaries (the Beneficiaries) of various family trusts (the Trusts) against the two predecessor trustees of the Trusts (the Predecessor Trustees).³¹ In 2013, when the Predecessor

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Trustees filed a petition for interim accounting, the Beneficiaries filed a counterclaim alleging, among other things, that the Predecessor Trustees engaged in "fraud, theft, and self-dealing."³² According to the court of appeals' restatement of the case, the Predecessor Trustees indeed "defrauded the trusts of millions of dollars."³³ However, the Beneficiaries and the Predecessor Trustees were not parties to the case brought in the court of appeals. Rather, this case was brought by the Successor Trustee—who was appointed in 2015 after the first Predecessor Trustee was removed and the second Predecessor Trustee resigned³⁴ —against a law firm and an attorney in that firm (the Attorneys) who had represented the Predecessor Trustees while they were serving as trustees.³⁵ The Successor Trustee alleged that the Attorneys have been complicit in and aided and abetted the Predecessor Trustees in various transactions that had caused these damages to the Trusts.³⁶ The court of appeals noted that the Successor Trustee had filed his action over four years after the Beneficiaries had filed their claims against the Predecessor Trustees but less than two years after he had taken office as Successor Trustee.³⁷ The Attorneys filed a motion to dismiss on the ground that the Successor Trustee's action was filed outside the statute of limitations period. The Fulton County Superior Court converted the motion to a motion for summary judgment. The trial court granted the motion in part and denied the motion in part and reconsidered the motion in light of a federal criminal indictment that was issued charging the first Predecessor Trustee with a crime relating to the transactions that had been the subject of the civil cases.³⁸ The Successor Trustee and the Attorneys cross-appealed.³⁹ In a detailed opinion, the court of appeals

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examined the theories raised by each party, the most important of which are discussed below.

1. The Attorneys' Theories

Using agency theory, the Attorneys claimed that any knowledge that the Predecessor Trustees had was imputed to the Successor Trustee and thus precluded any tolling of the statute of limitations based on fraud.⁴⁰ The court of appeals first distinguished an agency relationship from a trust relationship and noted that "a trust has 'no independent legal existence apart from its trustees.'"⁴¹ The court of appeals quoted a recent decision of its own that stated ordinarily "a successor trustee is clothed with all the rights, duties and obligations of [the] predecessor" trustee.⁴² However, the court went on to point out, even though the knowledge of an agent is generally imputed to the principal, "there does not seem to be an explicit principle in trust law imputing knowledge to successor trustees."⁴³ The court went on to say that, even if agency law were applied, the Predecessor Trustees' knowledge could not be imputed to a Successor Trustee when "the person claiming the benefit of the notice or those whom he represents, colluded with the agent to cheat or defraud the principal."⁴⁴

The court then turned to the Attorneys' argument that, under Official Code of Georgia Annotated section 9-3-96,⁴⁵ the statute of limitations is tolled by fraud only if the plaintiff used...